LAW & HAPPINESSThomas S. Ulen

Federal Judicial Center Program for Bankruptcy Judges

University of Illinois College of Law

Monday, September 27, 2010

Overview• Introduction. • Why is this an important topic? • What are the central findings of the literature on

happiness? • What are the implications for law and for public policy?

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Economics• What motivates people’s decisionmaking?

• Utility maximization. • The inherent subjectivity of preferences or of well-being.

• Infer preferences from behavior – “revealed preferences.” • No interpersonal comparisons of well-being. • Diminishing marginal utility of income and wealth. • No objective aspects of well-being.

• Rational choice theory. • Decisionmakers know their preferences (which are transitively

ordered) and the constraints (principally time, income, and wealth) under which they act.

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Happiness studies• An empirical literature.

– Psychologists (Professor Ed Diener of the University of Illinois and Professor Martin Seligman of the University of Pennsylvania) • Hedonic or positive psychology.

– Economists. – Conducted in more than 150 countries and involving more than 1

million people. – See www.worldvaluessurvey.org.

• Surveys begin with this question: • “All things in your life taken together, how happy would you say that

you are on a scale of 1 to 10, with one being the lowest and 10 the highest level of happiness?”

• Subjective well-being (SWB).

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Happiness studies 2• Collect socio-economic and demographic data.

• Age.• Health.• Income.• Marital status. • Religion. • Number of close friends. • Ethnic identity. • And more.

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Happiness studies 3• Regress socio-economic and demographic data on

happiness scores. – Happiness scores are the dependent variables. – Age, marital status, religion, income, etc. are the independent

variables. – Coefficients on independent variables tell us what factors are

significant in explaining and predicting happiness and how strong those significant effects are.

• Gives an “objective” aspect to “subjective well-being.”

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How seriously should we take these self-reported happiness results? • Are people really the best judge of their own well-being? • Won’t answers be affected by mood, weather, whether the

interviewer gives the questioner a piece of chocolate? • Attempts to check for consistency:

• Check consistency over time with the same individuals surveyed. • Check consistency by asking friends and co-workers. • Check consistency by observing behavior.

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Isn’t there more to life? • Is “happiness” really what life is all about?

– Other values• Love• Integrity• Creativity• Making the most of one’s gifts

– Happiness as the integral of all these other values– What about “artificial happiness”? – Second-order preferences for how one becomes happy.

–Do “happiness” and “life satisfaction” mean the same thing in different cultures?

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Some results• Most people are happy

– Denmark has, on average, the happiest people. – U.S. is in the top ten, with average happiness of about 7.8.

• Easterlin paradox– Reported happiness does not increase with average per capita

income. – Progress paradox.

• Relationship between happiness and income. – Positive relationship up to about $75,000 per year. – Relative income matters but not relative non-income rewards.

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Results 2• Four factors associated with the happiest people.

• Married. • Friends. • Job. • Religion.

• Comparative well-being. • Over the life cycle – that is, with age. • Gender. (Stevenson & Wolfers)

• Women’s objective circumstances have improved over the last 35 years but their happiness levels have fallen absolutely and relatively to men.

• African-Americans. (Stevenson & Wolfers) • Blacks are less happy, on average, than whites, but the gap has

lessened significantly over the last 35 years. • Concentrated among women and those living in the South.

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Results 3• Direction of causation.

– Happy because one has income or does one have income because happy people succeed.

• Relationship between happiness level and striving. • Poor at predicting the things that will make us happy.

• Affective forecasting. • Dan Gilbert, Stumbling on Happiness (2006).

• www.ted.org.

• “Does living in California make us happy?”

• Adaptation. • The “hedonic treadmill.” – Lottery winners and paraplegics. – Losing a job. – Losing a child. – Losing a spouse or partner.

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Results 4• Remembered v. experienced well-being.

• Duration neglect. • Peak-end rule.

• Interrupted experiences. • Intuition: do not interrupt a positive experience, but do interrupt a

negative experience. • Painful physical therapy or colonoscopy. Ex ante, give the patient the

option to take a break in the middle. • Having a relaxing massage. Ex ante, give the customer the option to

take an intermission. • In experiments, most people say that they would prefer to take a break

during the unpleasant experience but would not like to take a break in the pleasurable experience.

• However, experiments show that these predictions are wrong.

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Results 5• Interruptions (cont’d.)

• We know that people adapt and that breaks disrupt the adaptation experience.

• But people believe that a broken experience is a weakened experience.

• Rather, breaks intensify experience by disrupting the adaptation process.

• So, insert an intermission in a long movie. But do not interrupt a negative experience (if you want to adapt to it).

• Kahneman & Deaton• Distinguish two aspects of SWB: emotional well-being and life

satisfaction. • Income and education are highly correlated with life satisfaction. • Emotional well-being correlates with health, care-giving, loneliness

and smoking. No increase with incomes above $75,000 per year.

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Some legal and policy implications• Progressive taxation. • Unemployment policy. • Criminal sanctions.

• Duration neglect; peak-end rule. • Interruptions.

• Compensation for tortious wrongs.

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Principles for being happier• Principle 1: Buy experiences instead of things. • Principle 2: Help others instead of yourself. • Principle 3: Buy many small pleasures instead a few big

ones. • Principle 4: Buy less insurance. • Principle 5: Pay now, consume later. • Principle 6: Think about what you’re not thinking about. • Principle 7: Beware of comparison shopping. • Principle 8: Follow the herd instead of your head.

• Dunn, Gilbert, & Watson (forthcoming).

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Can you measure your own happiness?

• Gallup-Healthways Well-Being Index. • Dan Gilbert’s “track your happiness” website. • Predict your own (or someone else’s) happiness by using

Nick Powdthavee’s “happiness equation.”

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Thank you

Questions?

Comments?

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